November 8, 2012

Foxconn Says It Is Finding It Difficult To Keep Up With iPhone Demand

Supply and demand: It´s a deceptively simple notion. It´s one thing to be unable to get products in customers´ hands because demand is so high. It´s another to be unable supply products because your factory can´t churn out enough product.

Take, for instance, Apple´s new iPhone 5. More than 5 million customers picked up the latest Apple smartphone during the first 3 days of its availability. According to Parth Dhebar with Unwiredview, customers are still lining up in front of Apple stores to get the iPhone 5.

Apple can´t make these phones fast enough, but according to the CEO of their production plants, the high demand isn´t the only reason it´s been hard to keep shelves stocked: They´re also quite difficult to assemble.

“It´s not easy to make the iPhones. We are falling short of meeting the huge demand,” said Terry Gou, CEO at Foxconn Technology Group. Speaking to a group of reporters, Gou also said the plant's Hon Hai division, responsible for assembling Apple´s iPhone, is having trouble cranking out as many units as Apple needs.

According to earlier reports, Apple´s exacting standards for the new iPhone might have been a tipping point for an already volatile work environment in the Foxconn factories. Early last month, reports began to emerge from China that workers were striking due to the high quality standards of the new phone. Some reports told stories about fights breaking out in the factories between the workers and the management in quality assurance.

China Labor Watch, a workers advocacy group, issued a press release last month, calling any work stoppage a “strike” and detailing some of the violence which took place inside the plants.

“Additionally, quality control inspectors fell into conflicts with workers and were beat up multiple times by workers. Factory management turned a deaf ear to complaints about these conflicts and took no corrective measures. The result of both of these circumstances was a widespread work stoppage on the factory floor among workers and inspectors.”

The iPhone 5 has also been plagued with a shortage of materials, namely the display. One of their display makers, Sharp, was rumored to have been the source a bottleneck in the supply chain, unable to adequately produce enough of Apple´s newest display.

In the last week of September, Sharp announced they were finally able to produce “adequate volumes” of these new, in-cell displays which laminate the touch panel and the top layer of glass together. This feature is one way in which Apple was able to make the iPhone 5 much thinner and, presumably, much more difficult to make.

While Gou didn´t go into specifics about his company´s struggle to keep up with demand, it´s likely Apple´s tough build quality and new components aren´t making it any easier on an already tense situation at Foxconn.